Payment of a corporate dividend in the form of stock rather than cash. The stock dividend may be additional shares in the company, or it may be shares in a subsidiary being spun off to shareholders. Stock dividends are often used to conserve cash needed to operate the business. Unlike a cash dividend, stock dividends are not taxed until sold.

Stock dividends are dividends paid in shares of the issuing corporation’s stock instead of cash. Their effect is the same as that of a stock split. For example, just as a $200 per share stock will sell for $100 after a 2-for-1 stock split, so it will sell for $100 after a 100% stock dividend. In a 100% stock dividend or a 2-for-1 stock split, there are twice as many shares outstanding.

See dividend.